Snow and taxes

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About this time last year it was SNOW DAY! in London. This will cause scoffing amongst those of you currently wrapped in a yakskin sitting on a crate of tinned food and reading your monitor by the light of a burning heap of cattle. Or whatever it is people do Outside London. But for us SNOW DAY! was pretty special.

For a start, common unspoken consent dictated that tax advisers could wear wellie boots, their oldest, warmest jeans and a very fluffy cardigan with egg on it to work because, well, it’s SNOWING! After a fruitless hour on the bus creeping a total distance of five hundred yards, I got out and walked, like, TWO MILES! in, like, SIX INCHES OF SNOW! to work. It took about an hour and a half. I walked on grass verges suddenly strange and invisible, along deserted white roads that might have morphed back into the original cattle-drover’s dirt tracks and village lanes connecting Muswell Hill to Friern Barnet and Friern Barnet to Whetstone. I walked past sparkling, crispy, coated parks that had taken on the silent endless quality of a sweep of heath. It was wonderful. And once I had got to work, a few desultory hours of sharing snow-stories later, there was early release in case of another late afternoon fall, upon which SNOW DAY! became PUB DAY! and was even better for it.

Part of the reason all this was tremendous fun as opposed to a gigantic arse-pain was that the tax return deadline had just passed, and aside from chasing up the laggards (“Oh, yes, and I sold my rental property in August – should I have told you that before the afternoon of the 30th January?”) working in tax for the first week of February mostly involves lying weakly across one’s chair seeing how many Mini Eggs one can fit into one’s mouth – and it’s an earned rest, believe me. All this comes to mind again now because the next big oncoming date in the tax year is 5th April – New Year’s Eve in tax land, and generally an excuse for a departmental dinner.

I will not be celebrating. In last year’s budget, Labour pulled off, baldly and blandly, a trick only equalled in balls-out illiberal people-bashing by Caroline “veins of” Flint’s announcement that she’ll put council tenants out on the streets if they aren’t seeking work. They have, of course, reduced the 22% band to 20% and, critically, scrapped the 10% band, as any fule kno. For anyone who has inexplicably neglected their personal tax studies of late , here is the computation for someone earning £15,000 Before and After the changes. Pay attention, class.

2007-08

Salary: 15,000

Less personal tax free allowance (5,225)

9,775

15,000 less:

Less tax @ 10% on 2,230 (223)

Less tax @22% on7,545 (1,659.90)

13,117.10

Divide by 12 for PCM pay after tax 1,093.09

2008-09

Salary: 15,000

Less personal tax free allowance: (5,435)

9,565

15,000 less:

Tax off the lot at 20% (1,913)

13,087

Divide by 12 for PCM pay after tax 1,090.58

Tax fans will have spotted that I haven’t taken the National Insurance off. That’s because I can’t be arsed, but it’s also because the rates for NICs are only going up by the normal amount. I’ve done the fiddly tedious sums and it doesn’t make much difference – brings the monthly pre-inflationary difference from 20 quid down to 17. Gee, thanks. (See comments)

I mean, I’m sorry, let’s just say this again – Labour have raised taxes on the lowest earners and they have got away with it. Once more, with feeling…

So why at the end of January was the FT carrying the story that a study of April’s changes by the Institute for Fiscal Reform will advantage the richest and the poorest? Ah, of course! Tax credits! The removal of the 10% band is not a swingeing and senseless assault on low incomes after all! It’s done so that the government can spend money collecting the extra money, then spend money administering the extra money and messing it around a bit, then spend more money giving it out to (some of) the people they took it off, then spend yet more money checking they’ve done it right and taking it back off some people chosen apparently out of a really short-tempered and unreasonable hat (a sort of antithesis of the Hogwarts Sorting Hat, perhaps). But it’s really worth the extra trouble and expense, because you see, this way the government will have seen the money, and held it for a minute, and they now know it’s there, and know where it has gone.

A tremendous pity therefore that a few days later in the FT there was a gleeful piece on a recent report which says (and this is an executive summary) that tax credits are still rubbish. So by the lights of the original IFS report, Labour’s plans for the 2008-09 tax year are currently advantaging the rich only. But hey, never mind. I’m sure it’s just a question of a better management hierarchy, more targets and some motivational speaking.

@Anna – oops! Thanks. Not adding the PA back on was always, for some reason, one of my classic slips. The effect of the correction is to bring the difference between last year’s salary and this year’s from about £20 down to about £2.50 per month (pre-inflation). This differential increases the lower paid you are (by £9,000 pa it has increased to £12.50 less per month).